Will $15 an hour wages help or hurt California?

How will the $15 wage affect San Bernardino?

Last month, California made American economic history when Governor Brown signed a bill into law making the state the first in the country to raise its minimum wage to $15 an hour by the year 2022. Currently, the in-state minimum wage is $10 an hour.

To better understand the effect of the raise, KCRW visited two cities on each end of the economic spectrum: San Bernardino and Santa Barbara.

For years, San Bernardino has been in economic decline because of the closure of manufacturing plants and the bursting of the housing bubble in 2008. People in the community are split over whether a $15 an hour minimum wage will help or hurt San Bernardino. Photo: Saul Gonzalez

If there’s a city in California where workers could benefit the most from a $15 an hour minimum wage, it’s San Bernardino. Home to 200,000 residents, the U.S. Census Bureau says it’s the poorest big city in the country, only after Detroit. The median family income in San Bernardino is $20,000 below the state average and half of residents receive some sort of public assistance.

“The low wages that we have, how can anybody survive on that kind of amount?” says Hope Olague, the manager of Helping Hands, a non-profit food pantry that every morning gives out bags of groceries to many of the city’s neediest, including the city’s working poor who earn the current minimum wage. “And they still have to come here and get some food because they cannot make it, they just cannot make it.”

Hope Olague is the manager of Helping Hands’ Pantry, a San Bernardino non-profit which provides groceries to many of the city’s working poor. She thinks a $15 an hour minimum wage will help many workers in the struggling city. Photo: Saul Gonzalez

In the parking lot of the food pantry, a temp worker named Robert Lox was loading donated groceries into the trunk of his car. He holds temporary jobs in San Bernardino’s warehouse industry, which pay him the current minimum wage. The income, he says, makes it impossible to save any money for an apartment, so he lives in his car. Lox says a $15 an hour minimum wage would change his life.

“I’d be able to get a place to stay,” says Lox. ” I’d have food on the table. I’d have more than just one pair of clothes. California is so expensive. It’s just so expensive. It’s hard to survive out here.”

But not everyone in San Bernardino supports the wage hike. Lox’s girlfriend, Brandy Canyes, who lives in the car with him doesn’t think raising the state’s minimum wage will solve their economic problems.

“Because all the prices get raised in order to compensate for the minimum wage being raised, so we stay in the same spot that we are already in,” says Canyes. “It doesn’t get any better.”

San Bernardino’s business people and employers are also thinking about the costs and benefits of increasing California’s minimum wage to $15 an hour. They include Albert Okura, who owns a piece of American business history, the very first McDonald’s that opened in San Bernardino in 1948, arguably the birthplace of America’s low-wage service economy.

Albert Okura owns both the site of the original McDonalds restaurant in the United States and his own fast food chain in San Bernardino. He says a big increase in the minimum wage isn’t needed in the community given what his mostly young employees spend their money on. Photo: Saul Gonzalez

Okura also owns Juan Pollo, a small chain of fast food restaurants in San Bernardino. He says paying his workers more would hurt his efforts to help San Bernardino by selling budget-conscious meals and employing job hungry young people. He also says his employees don’t need a big wage hike.

“They’ve been buying season passes to Disneyland, a new Apple watch,” says Okura. “They are fixing their cars. They just went to Universal Studios the other day. I can’t afford that.”

Okura predicts California’s minimum wage increase will do more harm than good to hardscrabble San Bernardino by increasing unemployment as businesses cut costs by laying-off workers.

How will the $15 wage affect Santa Barbara?

Santa Barbara is 150 miles northwest of San Bernardino, but in another world when it comes to its economy. With its white-sand beaches, Spanish architecture and luxury hotels, Santa Barbara markets itself as “The American Riviera.”

The “Riviera” in Santa Barbara is home to multi-million dollar homes. Photo: Kathryn Barnes

The median home price in the city is nearly $1 million, and the median income is $25,0000 more than San Bernardino’s.

In a city of such affluence, what would be the big deal about raising the minimum wage? Plenty to Mitchell Sjerven, the owner of the Wine Cask, an upscale restaurant in downtown Santa Barbara. He fears what the minimum wage increase will mean for his labor costs.

“The most unfortunate part as a restaurant owner is you value your people, but yet at the same time your labor expense is your single biggest challenge in the restaurant world,” says Sjerven.

Unlike Albert Okura in San Bernardino, Sjerven already pays his employees more than the minimum wage. He fears a further increase in the wage will spark demands for even higher pay between employees with different skills.

“Imagine if you’re a line cook,” says Sjerven, “and you’re making $16 bucks an hour and you’re fresh out of culinary school and finding your way, and a waiter is making $10 bucks an hour plus tips. That brings them up to $50, $60, $70,000 a year. Now, all of a sudden you have to pay him $15 dollars an hour.”

Sjerven fears his beginning cooks will then start demanding pay of up to $20 an hour as a way to keep up with the restaurant’s waiters. This, he says, could force him to reduce his hours and fire staff.

While this minimum wage hike could hurt Santa Barbara’s restaurant owners, the big question in this pricey coastal city is whether it will give workers enough money to pay for their biggest expense, housing.

One local worker who has struggled to find housing is Cassie Huerta. She works three jobs, two of them at restaurants, to pay for a two bedroom apartment she shares with three people.

“I looked really long and hard for housing. It was very difficult to find a price point that worked for us,” says Huerta.

But she questions whether a big boost in the minimum wage would really help her with her housing costs and other expenses.

“Tips are my paycheck,” she said. “Raising the minimum wage wouldn’t help me much, since all of my bills are paid through tips.”

Cassie Huerta works at two restaurants and shares a 2-bedroom apartment with three people. “Tips are my paycheck. Raising the minimum wage wouldn’t help me much, since all of my bills are paid through tips.” Photo: Kathryn Barnes

While a minimum wage hike in San Bernardino and other inland parts of the state has the potential to change the lives of many people living near the poverty line, the effect in high-cost Santa Barbara, and other coastal cities like it, could be less dramatic.